Question

Shapland Inc. has fixed operating costs of $450,000 and variable costs of $40 per unit. If it sells the product for $80 per unit, what is the break-even quantity? Round your answer to the nearest whole number.

Answer 1

The break-even quantity for Shapland Inc. is approximately 11,250 units.

Step-by-step explanation:

To find the break-even quantity, we need to determine the number of units that need to be sold in order for the total revenue to equal the total cost. The total cost consists of both the fixed and variable costs. The total cost can be calculated as:

Total Cost = Fixed Costs + (Variable Cost Per Unit * Number of Units)

Given that the fixed operating costs are $450,000 and the variable cost per unit is $40, the total cost equation becomes:

Total Cost = $450,000 + ($40 * x)

Where x represents the number of units sold. Since the selling price per unit is $80, the total revenue equation is:

Total Revenue = $80x

For the break-even quantity, the total revenue is equal to the total cost:

$80x = $450,000 + ($40 * x)

Simplifying this equation, we get:

$80x - $40x = $450,000

$40x = $450,000

x = $450,000 / $40

x = 11250

Therefore, the break-even quantity is approximately 11,250 units.